As the rupee continued to get battered and the forex position became increasingly weake, the government has discussed the possibility of floating sovereign bonds after a decade to shore up forex reserves. "They (have given) us a lot of suggestions including sovereign bond issue. All options are on the table and we will examine as and when the need comes," chief economic advisor Raghuram Rajan told reporters after a meeting with foreign bankers. The government had in the past on several occasions floated sovereign bonds to tide over the balance of payment crisis.
The meeting called by Rajan was attended by representatives of several investment abd merchant banks including Citi, Bank of America and Barclays. Besides the bond issue, Rajan said bankers gave suggestions on making debt markets more liquid. "They (made) suggestions on a number of issues ranging from ways we can make the markets more liquid. What kind of funding needs India might have? How this could be brought in? …we will take note of them. "This was not a meeting to take decisions, it was to take inputs. This dialogue will continue. We now have bunch of ideas to reflect on", he added.
The current account deficit touched a record high of 4.8 per cent of the GDP in the 2012-13 financial year due to high imports, including that of gold. The situation deteriorated further after the initial statement of US Federal Reserve chairman Ben Bernanke suggesting gradual withdrawal of stimulus. His statement had led to sudden outflow of foreign funds, which in turn pulled down the value of rupee to all time low of 61.21 to a dollar last Wednesday. Things, however, stabilised after Bernanke said that stimulus programme would continue for some more time.
To tide over the balance of payments crisis, the government in 1991 issued the India Development Bonds and raised USD 1.6 billion. In 1998, it launched the "Resurgent Indi Bonds” soon after the announcement of nuclear tests and sanctions that followed. The scheme raised USD 4.2 billion. Two years later in 2001, the government rolled out "India Millennium Deposits" on the back of rising fuel prices and slowing capital flows. It was able to garner USD 5.5 billion.
